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Memorandum of Understanding Between Office for Budget Responsibility, HM Treasury, Department for Work and Pensions and HM Revenue & Customs

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Memorandum of Understanding Between Office for Budget Responsibility, HM Treasury, Department for Work and Pensions and HM Revenue & Customs Memorandum of Understanding between Office for Budget Responsibility, HM Treasury, Department for Work and Pensions and HM Revenue & Customs April 2011 Memorandum of Understanding between the Office for Budget Responsibility, HM Treasury, the Department for Work & Pensions and HM Revenue & Customs 1. The Budget Responsibility & National Audit Act 2011 establishes the Office for Budget Responsibility (‘the OBR’) as a central part of the UK’s fiscal framework, with responsibility for examining and reporting on the sustainability of the public finances. The OBR must be independent and expert—and perceived as such—in order to provide credible fiscal and economic forecasts and scrutiny of the long term sustainability of the public finances. 2. The OBR will provide essential analysis on which the Government can base its fiscal and economic policies. As such, for the OBR and the rest of Government to perform their respective functions effectively, close working will be essential. 3. This memorandum of understanding establishes a transparent framework for co- operation between the OBR and HM Treasury (‘the Treasury’), the Department of Work and Pensions (‘DWP’) and HM Revenue and Customs (‘HMRC’). This memorandum sets out the role of each body and how they will work together based on three guiding principles: • Accountability and transparency: the roles and responsibilities of each body must be clear and transparent, and respect the independence of the OBR; • Effective co-ordination: shared processes must be carefully ordered in response to the complex interdependencies of the four bodies; and • Regular information exchange: information must be shared regularly to enable each body to discharge its responsibilities effectively. 4. This memorandum does not constitute a legally binding agreement. The responsibilities of the OBR as set out in this memorandum are subject to the Budget Responsibility & National Audit Act 2011, and guidance provided in the Treasury’s Charter for Budget Responsibility1. Accountability and transparency 5. The Government is responsible for all policy decisions and policy costings. The OBR will provide essential analysis on which the Government can base its fiscal and economic policy decisions. 6. The OBR will examine and report on the sustainability of the public finances. As set out in the Budget Responsibility & National Audit Act 2011, its responsibilities will include: 1 Available from: www.hm-treasury.gov.uk • The production of at least two fiscal and economic forecasts each financial year, including independent scrutiny of Government costings and any resultant impact on the forecasts; • An assessment of the extent to which the fiscal mandate has been, and is likely to be, achieved alongside those forecasts; • An assessment of the accuracy of previous fiscal and economic forecasts at least once each financial year; and • An analysis of the sustainability of the public finances at least once each financial year. 7. The OBR will need to draw on forecasting and analytical resources across Government. The Treasury, DWP and HMRC will allocate appropriate analytical resources, agreed by a Forecast Liaison Group (paragraph 10) as reasonable and necessary for the OBR to fulfil its minimum responsibilities in paragraph 6. 8. In addition to paragraph 6, the OBR may also undertake any other analysis in accordance with the Budget Responsibility & National Audit Act 2011. 9. The responsibilities of the Treasury, DWP and HMRC, in assisting the OBR to fulfil its responsibilities, are as follows: • The Treasury is responsible for fiscal policy. Analysis of the direct impact of Government policies on the public finances will be provided to the OBR for independent scrutiny (which will state whether the OBR agrees or disagrees with the Government’s costings or whether it has been given insufficient time or information to reach a judgement) and to determine any resultant impact on the economic forecast. • DWP will provide forecasts of benefit payments, using their expertise on individual benefit regimes and access to benefit claimant data. It will base these on economic determinants provided by the OBR and the judgements and assumptions of the OBR’s Budget Responsibility Committee. It will monitor payments against these forecasts, and will work jointly with the Treasury to quantify the direct impact of relevant policies on the public finances. • HMRC will provide forecasts of tax revenues and tax credit payments, using their expertise on individual tax regimes and access to confidential customer data. It will base these on economic determinants provided by the OBR, and the judgements and assumptions of the OBR’s Budget Responsibility Committee. It will monitor receipts against these forecasts, and work with the Treasury to quantify the direct impact of relevant policies on the public finances. 10. The Forecast Liaison Group, chaired by the OBR, with representatives from the Treasury, DWP and HMRC, will meet periodically to consider the high-level working relations necessary for each body to deliver the responsibilities set out in paragraph 9. This should include the planning and allocation of information and analytical resources, co-ordination of the OBR’s fiscal and economic forecasts, and the resolution of areas of 2 dispute as appropriate. Where it is not possible to reach agreement, issues may be escalated to the Chair of the OBR and Permanent Secretaries as appropriate. 11. Signatories of this memorandum may request a review of its contents and implementation at any time. Effective co-ordination 12. Consistent with the Charter for Budget Responsibility, the date for publication of the OBR’s forecasts will be set by the Chancellor. In the absence of exceptional circumstances, at least 10 weeks’ notice will be provided for the OBR to produce the fiscal and economic forecasts. 13. Once notice has been received of the publication date, the OBR will consult and agree with the Treasury, DWP and HMRC on the scope, timetable and process for delivery of the forecast. The OBR will ensure as far as possible that it gives reasonable advance notice of any changes to these. 14. The delivery of the fiscal and economic forecasts and policy costings will be supported by governance arrangements, including: • The Forecast Liaison Group, which will meet periodically through the year (see paragraph 10), and more regularly in the run up to the fiscal and economic forecasts, to plan and oversee its co-ordination and to consider indirect policy impacts. It will be chaired by the OBR, with representatives from the Treasury, DWP and HMRC. • The Policy Costings Steering Group, which will meet periodically through the year and more regularly in the run up to fiscal events, to oversee the policy costings and certification process. It will be chaired by the Treasury with representatives from the OBR and HMRC. A separate meeting on welfare policy costings will be arranged between DWP, the Treasury and the OBR as necessary. 15. The OBR retains complete discretion over the timing of its assessment of the accuracy of previous fiscal and economic forecasts and its analysis of the sustainability of the public finances. The OBR may choose to consult the Chancellor in preparing these reports, but is not obliged to do so. 16. The Government may submit requests for the OBR to examine and report on areas of interest relevant to the sustainability of the public finances. The OBR retains complete discretion in determining its work programme and the timing of analysis, subject to its statutory responsibilities and available analytical resources. Requests and resulting reports will be published by the OBR. 17. The OBR may request additional analytical resources from the Treasury, DWP and HMRC for analysis set out in paragraphs 8 and 16. This will be subject to the following joint commissioning procedures, with agreement through the Forecast Liaison Group: 3 • Requests for analytical resources should take account of the scale and priorities of other demands, including Ministerial commissions, and departmental budget constraints. Workloads will be prioritised using clear and transparent processes. • The OBR will provide the Treasury, DWP and HMRC with a timetable for its analysis as relevant, and will provide regular updates of any changes to this timetable. 18. Representation at relevant domestic and international economic forums will be agreed between the OBR and the Treasury in advance, reflecting their respective responsibilities. Regular information exchange 19. The OBR has a statutory right to full and timely access to all Government information relevant to its analysis. The Treasury, DWP and HMRC will provide any information, and assistance to understand it, as requested by the OBR. This does not include confidential taxpayer and benefit claimant information2. 20. The OBR will have full access to the Treasury’s macroeconomic models and other Government forecasting and analytical models, and freedom to develop its own versions of these as it so chooses, within the limits governing access to confidential information, including confidential taxpayer and benefit claimant information. The Treasury, DWP and HMRC will provide necessary assistance to allow the OBR to appropriately scrutinise these models. 21. The Government will have full and timely access to information from the OBR, and assistance to understand it, as the Government regards reasonable and necessary in consultation with the OBR to fulfil its policymaking responsibilities. In particular, the OBR will provide the Government with timely access to the forecast information necessary to reach policy decisions ahead of fiscal events: • The forecast timetable will take account of the schedule for key data releases to ensure information is as useful as possible for reaching policy decisions. In normal circumstances, the Government will expect to receive information that it may require for policy decisions at least 4 - 6 weeks ahead of a fiscal event. • Where the OBR receives less than the normal notice of a fiscal event set out in paragraph 12, or where the Government indicates it does not expect to make policy changes alongside an OBR forecast, this expectation of 4 - 6 weeks’ notice will be reduced.
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